The relationship of government to the private sector
is very much in flux these days. Pressures are building to outsource more and
more government functions. At the same time, the federal civilian bureaucracy
is shrinking in alarming proportion to its oversight responsibilities. The
number of private contractors doing the work of government has accelerated,
while the number of federal employees needed to supervise them has
eroded. This imbalance has negative consequences for public management
generally, but it specifically makes surveillance of privatized activities an
urgent matter. When combined with the loss of key government personnel,
this lack of oversight and control becomes an inevitable consequence of privatization,
producing an imbalance between those in government who
should oversee and those in the private sector who are meant to be overseen.

The ratio of private contractors to public employees
is now almost 10 to 1, but the more
significant deficit is in the reduction of toplevel
government officials, such as contracting
officers and the Senior Executive Service, who
have seen their numbers drop as their contracting
oversight responsibilities have grown.
The Government Accountability Office (GAO),
for example, has reported that Department of
Defense oversight was insufficient in about
one-third of its contracts, a deficiency it attributes at least
partially to declining personnel levels. This
accountability gap is really a byproduct of two
converging forces: the deregulation movement,
which renders many government regulatory
programs unnecessary, and the privatization
movement, which transfers government activities
to the private sector. Deregulation critiques
the economic role of government over
the economy. It seeks to end programs that
are inefficient or counterproductive. Privatization
plays a different role. It accepts the need
for a government activity, but sees efficiency
advantages in shifting it to private hands.

In the United States, at least, privatization,
unlike deregulation, is concerned less with the
amount of government expenditures than
with where to place responsibility for the
activity. The size of government, viewed as a
percentage of the gross domestic product,
could well grow in a privatized environment,
as it has during the Bush administration.

Proponents of privatization and deregulation
share a belief that the market will improve
the services provided by a monopolistic
bureaucracy. Privatization was a cornerstone
of the reinventing government movement
during the Clinton-Gore administration. It has
thrived during the Bush administration. President
Bush’s vision of an “ownership society,”
which advocates private accounts as an alternative
to Social Security, further highlights the
private sector’s role in the provision of traditional
government services. Privatization is a
presumed good in this setting. And the reality
is that our government could not function without contracting
out some of its services. Privatization has been part of
government management since the post–World War II period,
but its acceleration to the limits of accountability is a relatively
recent phenomenon. Today, the degree and level of
those delegations has become a central issue of public policy.
In addition, stating a preference for private over public
solutions, as the “ownership society” suggests, can have unintended
consequences. By endorsing the view that private
enterprise provides a superior organizing principle to government
monopoly, privatization forces the public sector to
defend itself. Thus, the central question of the privatization
movement is whether the term “public sector” continues to
be a viable social concept. Stated alternatively, is the publicprivate
distinction, which has demarked law and political
theory from the earliest times, still meaningful in an era of
transcendent privatization?

For anyone who has studied the administrative state here
and abroad, the most complicated question is understanding
where the line between public and private is drawn. Often
the effort is abandoned as unproductive. Yet when confronted
with the phenomenon of privatization, the question becomes
irresistible; one is compelled to discover whether a
line (or some approximation of it) can be drawn. Identifying
the continuing role for the state in the context of privatization
implicates the public-private distinction and its connection
to democratic political theory.

The words “public” and “private” are so commonplace in
American law and society that they almost defy definition.
In society generally, these words are politically charged. To
take but one example, they have been invoked to separate
public discourse from private conversation in an effort to foster
civic engagement. Inevitably, the line between them
remains ambiguous and contested. Calling an activity “public”
has served to legitimate governmental action since society
was formed. Indeed, from the time of Justinian, “public
law” and “private law” have defined the relationship of the
individual to the state. In Continental jurisprudence, which
traces its roots to Roman law, public law carries with it substantive
obligations of the state to the citizen. In the Anglo-
American legal tradition, public law has similar, but less well
articulated connotations.

There is a long historical, political, and legal tradition
that supports the public-private distinction, its role in our
society, and the essential question of who runs the government
and for what reasons. This distinction is at the core of
those functions of government that are labeled “inherent.”
Such functions are performed by officials who exercise discretion
and are accountable for the important actions of government.

The privatization movement’s success has
placed these functions and the actors who perform them
increasingly at risk. Protecting the public sector means
placing some functions beyond the reach of privatization.
Our goal here should be to balance the two positives of the
private and public sectors—efficiency and accountability—
in ways that confirm rather than threaten our legal and
political traditions.

Giving the public sector an independent value does not
undermine the private sector. This is not a zero sum game.
Indeed, in terms of democratic theory this is a positive sum
game where both sides can win. If the public sector is given
independent value, the private sector benefits from clearer
rules and better oversight. Our tradition of political liberalism
keeps the public sector from usurping the essential role
of private enterprise. But our notions of civil society require
that the public enterprise operate effectively as well.

It is difficult for the courts to implement the publicprivate
distinction under the Constitution. But if Congress
replaces the Office of Management and Budget’s Circular A-
76, which sets a competitive process that allows government
employees to challenge rampant privatization, with a better
defined statute that guarantees objective consideration of
the larger issues, these questions can be resolved.

An expanded administrative process could be led by
GAO, which can help ensure that the government remains
in charge of those functions that are crucial to our functioning
as a civil society. Its role as an objective decider and honest
broker gives it enormous credibility. There is also no substitute
for the public’s voice on these matters, as expressed
both through public-private competitors and a broad range
of interest groups. Should GAO’s role expand, congressional
interest will be heightened. Congress must evaluate what
society is losing when the private-public distinction is subordinated
to the privatization movement. At stake, of course, is
the degree of accountability and credibility necessary to
make our government and society work effectively.

Privatization need not be the enemy. Many functions of
government can be performed better and more effectively
with competitive sourcing. But the higher up the policy ladder
the process goes, the closer one gets to inappropriate
delegations. What is lost is not just the position, but the credentials
of the official involved. As Justice Scalia noted in
his Webster v. Doe dissent, government officials take oaths of
office to uphold the Constitution. But they also subscribe to
stringent conflict of interest and ethics rules, and work for
more than money. Oaths and badges are not merely symbols
or formalities. They accompany the defining qualities
of authority and credibility.

In our post-9/11 world, government officials have earned
renewed respect from the public. The credibility of a public
sector employee is not easily transferred to the private
sector. The public’s perceptions matter. As we have seen in
connection with Congress’s creation of public officials to
provide airport security, the public often prefers to have
government officials in charge. The public is both demanding
and respectful of government officials. Admittedly, credibility
is hard to measure, and we are entitled to be skeptical
about it. Still, the values behind public service that help animate
the public-private distinction can also energize public
decision making. When private contractors perform inherent
government functions, they weaken government’s
capacity to do the common good.

The goal is to grant privatization its due while protecting
public sector values. Boundaries are admittedly hard to
draw, but locating them has become an imperative exercise
in public law and government management. This is not just
a matter for the courts. All three branches of government
take oaths to uphold the constitution, and each has a stake
in ensuring that this exercise succeeds.